Question

P11-1 Depreciation Methods LO 1L2 Winsey Company purchased equipment on January 2, 2019, for $700,000. The equipment has the following characteristics: SHOW ME HOW Estimated service life Estimated residual value 20 years, 100,000 hours, 950,000 units of output $50,000 During 2019 and 2020, the company used the machine for 4,500 and 5,500 hours, respectively, and produced 40,000 and 60,000 units, respectively. Required: Compute depreciation expense for 2019 and 2020 under each of the following methods: 1 straight-line method 2. activity method based on hours worked (round the depreciation rate per hour to 2 decimal places) 3. activity method based on units of output (round the depreciation rate per unit to 2 decimal places) 4. sum-of-the-years-digits method 5. double-declining-balance method 6. 150%-declining-balance method 7. Next Level If Winsey used a service life of 16 years, 80,000 hours, or 750,000 units of output, what would be the effect on depreciation expense under the straight-line, sum-of- the-years'-digits, and declining-balance depreciation methods? Round your answers to the

Answer 1

A straight have method Depreciation Expenses cost af Auet - Salvage value useful life of the Amet 2019/ Dep Exp) - 700000 – 50000 20500 20 6.5000 32500 zo 2020 = 32500(at would be same for all the years) Activity Based on hours workert Perfomad For 2019 (Cost-Salvage Value) x Actual Dep, Exp. = 4 8 сына Total estimatect life time activity = 700000 – 50000)x 4500 100000 650ooox 45.00 |peos Dep. Exp = 29250/

For 2020 i costa 400000-29250 = 6707501 - Dep. exp. = (670750-50000) x 5500 1ooooo = 620750X5500 - 34141.25 16oooo = $ 34141 • Activity method based on hentert unit For 2019 Dep. Exp. = 700000-50000) = 40000 950ooo 650000 X 40000 21360,421 950ooo = $2736 0 For 2020 Dep. Exp = ( 672632-500001 1 672632-50000 x 60000 95000o = 622632 X6 GEDAAAA 95 = 39324.126 = $3932 y

Sum of the year Methad. o Remaining the acret Dep. Exp. = x Depreciable Sum of the years diget for 2049 20 x (700000-50000) 210* 61904,76 = $ 61905 For 2020 =_19_x(700000-50000) = 58809,523 = $ 58010 210 Note * 20+19+18 +17+16+-+----.5+4+372 + 1 =210 Double Decline Balance methool Foc 2015 Dep. Exp arronding to SLM = 650000 - 32500 at would be 5% of the cost. a Nou Double the to rate 1.e. = 10%. Dep. Exp. For 2019 = 650004x14 - Loo Dep. Exp for 2020-(650000-65060 x 20 ooo مهر58 م حور

- © 150% of Declining method According to sam rate in 5%. Nowe multiply by 1.5% = 5X115 - 7:57 Dep. exp. for 2019 - 650000 x]15 $ 48750 100 Dep. Exp. for 2020 -(650000 -48750)x7,5, 45093.75 = $45094 1oo